Building a Virtual Machine Inside ChatGPT

# · 🔥 2,013 · 💬 902 · one year ago · www.engraved.blog · 317070 · 📷
The second asset we could invest in, has an expected return on investment of 7% per year, with a volatility of 15%. This matches the volatility and growth of the S&P500. The third thing we could invest in has an expected return on investment of 7% per year, with a volatility of 38%. This volatility is akin to the volatility of Bitcoin. What is the return of such a dice-stock? Well, my expected return on investment is 3.5%. You can trust me that the volatility here is about 1.7%. If my portfolio only invests in this stock, the return and volatility on my portfolio will be exactly 3.5% and 1.7% as well. What if the blue die would always do the exact opposite of the red die? Mind you, it is still a blue die, with an expected return of 3.5% and a volatility of 1.7%, but it just magically happens to always do the opposite of the red die. Wow, so if the blue die does the opposite of the red die, you always get exactly your expected return! There is zero volatility here. An expected return of 3.5%, but a volatility of 1.7%. Why is this? Well, if both dice always throw the same number of eyes, and you average their number of eyes, you might as well throw a single die and look at the eyes of that die. If you diversify over similar stocks, your return stays the same, but the volatility goes down! In the absolute best case of this diversified approach, you can keep your returns while removing all volatility.
Building a Virtual Machine Inside ChatGPT



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